Voting memberships are most useful when an organization wishes to be democratically controlled by its constituents. By way of example, voting membership structures are commonly used by member driven organizations such as social clubs, churches, chambers of commerce and trade associations. In such cases, the organization exists to serve its members and its makes sense for control to be ultimately vested in the members.
Voting memberships can also complicate the governance of a nonprofit corporation. For example, voting membership corporations must keep up with noticing and documenting members’ meetings in addition to directors’ meetings. The membership roster and status of dues payments or other qualifications must be monitored to know who is eligible to vote.
Voting membership corporations can also be fickle. If the requirements for membership are set too low, it is possible for factions within the membership to sign their supporters up as members and shift the direction of the nonprofit.
Frequently, nonprofits fail to consider these challenges and decide to amend their governing documents to eliminate members voting rights or to eliminate members all together. However, under the laws of most states, voting members’ rights cannot be eliminated without their express consent.
For example, in Arizona, in order to abolish the rights of voting members, the voting members must receive at least 10 days notice of the proposal including a copy of the proposed changes. The meeting notice must also state that the purpose or one of the purposes of the meeting is to consider the proposed amendment and must include a copy or summary of the amendment. Further, a minimum 2/3 super-majority of the voting members must approve the measure.
Often, members see the wisdom of converting to a non-member governance model. For example, many organizations looking to convert are not able to persuade their members to attend member meetings making it impossible to conduct corporate business in a timely manner. In such cases, converting to a non-member model makes obvious sense. In other cases, factions of members may feel their rights are being threatened and oppose attempts to abolish their voting rights. Opposition is often the result of ambiguity stemming from poorly drafted bylaws or inconsistent member participation.
To minimize the chance of conflict, the best practice is to carefully consider the role of members, weighing the benefits of a representative board with the burdens of having two layers of decision-making bodies and the increased compliance duties that result.
Ellis Carter is a nonprofit lawyer licensed to practice in Washington and Arizona. Ellis advises tax-exempt clients on federal tax matters nationwide.